CySEC proposes three levels of leverage for retail clients

With the upcoming end date of EU-wide product intervention measures on July 30, 2019, national regulators are seriously contemplating the implementation of their own rules.

The Cyprus Securities and Exchange Commission (CySEC), previously, has refrained from announcing its opinion on this matter. However, just recently the regulator published an official statement proposing to establish leverage levels on a risk-based factor.

In other words, different clients with different experience will be assigned to different classes and able to use different leverage depending on their tier. In the meantime, binary options offerings to retail clients are confirmed by the CySEC to be entirely prohibited.

RISK-BASED APPROACH

Proposed by CySEC approach will be directly related to the level of knowledge and risk awareness of retail clients. Each retail clients must be classified by the brokers within a specific target market – either ‘positive’ or ‘negative.’

Retail clients who won’t be classified as any of the above categories shall remain in the ‘grey’ area of the target market and receive leverage of 20:1 on traditional currencies. In case of digital assets trading, no leverage will be available to these clients.

In addition to the above, the regulator suggested a prohibition of marketing, distribution, and sale of leveraged CFDs on crypto assets to retail clients.

CLIENT PROTECTION

According to the Head of CySEC, Demetra Kalogerou, the standards in the sphere of marketing, selling and distributing retail contracts for difference has tightened greatly.

“Temporary product intervention measures set across Europe have supported CySEC’s own efforts to enhance investor protection. As this guidance is introduced into legislation alongside additional national measures and restrictions set by CySEC, our communication with investors and the industry representatives will provide an opportunity for feedback on what we see as the fundamental new rules of engagement.”

Additionally, Kalogerou underlined that customer demand for high risk, speculative trading products continues to increase in Europe, wherein Cyprus investment firms must continue reforming their business models to ensure investors are adequately protected.

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